OSFI. Memo AA

Question 1

who sets the requirements of AAR and what is the relevant legislation?

Answer 1

• OSFI sets the requirements
• the governing legislation is ICA

Question 2

is the AAR part of an insurer’s annual return?

Answer 2

yes, it is a statutory requirement

Question 3

briefly describe what is included in the AAR (4)

Answer 3

• Opinion on whether policy liabilities determined by AA are fairly represented in insurer’s financial statement
• detailed commentary
• supporting data
• calculations

Question 4

identify the 3 audience for AAR

Answer 4

• regulators
• OSFI’s actuaries
• insurer’s management

Question 5

describe the key objective of “Application of Professional Standards to the AA’s Valuation”

Answer 5

ensure valuation of insurance contract liabilities adhere to standards set by CIA

Question 6

describe the role of AA in applying professional standards

Answer 6

• use judgement, develop methodologies, but remain consistent with professional standards
• any methodology used should be denfensible

Question 7

describe the relevant standards regarding the appointed actuary’s data

Answer 7

data must be accurate, relevant and consistent over time

Question 8

what should be done if there are changes in data or methodology from previous year?

Answer 8

changes should be justified and clearly disclosed in the report

Question 9

what are the deadlines for submitting AAR, FCT and Peer Review report?

Answer 9

• AAR: 60 days post fiscal year end
• FCT: earlier of 30 days post presentation to the board or one year after fiscal year end
• Peer Review:
  
  • pre-release: same as P&C financial returns
  • post-release: 30 days after release of AA’s report (on work reviewed)

Question 10

what minimum qualification must appointed actuary have?

Answer 10

FCIA

Question 11

Can the AA’s valuation be different from amounts booked in the Annual Report?

Answer 11

Yes, but if the difference is greater than AA’s materiality standard, AA must provide an explanation

Question 12

what actions can OSFI take if they find issues during an AAR review?

Answer 12

• OSFI can require modifications to assumptions or methods and mandate a re-filing of AAR
• they may also request supporting documentation or a report from an independent actuary

Question 13

what is expected of AA during an OSFI review of AAR?

Answer 13

• respond promptly to supplemental requests
• have supporting documentation available for inspection

Question 14

identify 3 sections that should be included in any AAR

Answer 14

any 3 of
- Expression of opinion
- Supplementary information supporting the opinion
- Materiality standard
- Data
- Risk adjustment for non-financial risk
- LIC
- LRC

Question 15

Under the margin approach, what must the AA disclose about the margins?

Answer 15

the level of margin used for each actuarial line of business and its justification

Question 16

what is the AA required to disclose about insurance acquisition cash flows?

Answer 16

the recoverability test as required by IFRS17

Question 17

quizzes

Question 18

if the actuary was appointed in the last year, what must AAR include about the AA?

Answer 18

• date of appointment
• previous actuary’s resignation date
• when OFSI was informed about the appointment
• confirmation of communication with former actuary as per ICA
• a comprehensive list of the new actuary’s qualifications

Question 19

identify the annual reporting requirement in the AAR for BoD or Audit - Canadian entities

Answer 19

AAR must disclose the date the AA met with board or audit committee

Question 20

identify the annual reporting requirement in the AAR for BoD or Audit - foreign entities

Answer 20

AAR must disclose the date of AA met with the chief agent

Question 21

identify disclosures in the AAR regarding continuing education

Answer 21

AAR must disclose that the AA is in compliance with the continuing professional development requirements of the CIA

Question 22

identify disclosures in the AAR regarding compensation

Answer 22

• disclose total compensation to ensure unbiased judgement
• methodology for deriving compensation
• compensation details for an internal actuary (salaries and bonuses)
• compensation details for an external actuary (consulting fees)
• disclose compensation details to OSFI in a separate cover letter

Question 23

identify disclosures in the AAR regarding reporting relationship for an internal actuary

Answer 23

老板, 变化（已经发生、将会发生）
- must disclose the name and position of their direct supervisors including both solid & dotted line reporting relationships
- should report any changes in reporting relationships that occurred within the past year
- need to disclose any expected changes in reporting relationships

Question 24

identify disclosures in the AAR regarding reporting relationships for an external actuary

Answer 24

谁雇用, 与谁联系并讨论
- should disclose names and positions of their main contacts within the entity
- must include name and position of the individual who hired them
- need to disclose the entity employees with whom they discuss their findings and rpeorts

Question 25

what disclosures are required by new AA in next AAR

Answer 25

- dates: outgoing AA exit date, incoming AA start date, PSFO notification date - communication: between incoming and outgoing AA - qualification of new AA

Question 26

identify the purpose of Unpaid Claims and Loss Ratio Analysis exhibit

Answer 26

to allow the presentation of industry loss information in a standard format

Question 27

identify the type of analysis the UCLR Exhibit is designed to facilitate

Answer 27

- impact of discounting on estimates of future CFs - loss trends

Question 28

briefly identify the information contained in UCLR

Answer 28

it is organized by AY and LOB, shows - Paid loss - LIC including FCFs - AIC including FCFs - Loss Ratio - Claim Counts

Question 29

what is the formula for LR for 2022 and prior?

Answer 29

claims/EP

Question 30

what is the formula for LR for after 2022?

Answer 30

claims / insurance revenue

Question 31

AA's expression of opinion

Answer 31

To the policyholder and shareholder of ABC insurance company, I have valued the policy liabilities of the company for its consolidated financial statements prepared in accordance with IFRS for the year ended... In my Opinion, the amount of policy liabilities is appropriate for this purpose. The valuation conforms to AAP in Canada and the consolidated financial statements fairly present the results of the valuation.

Question 32

AA's expression of opinion fill in the blank information

Answer 32

- name and signature of AA - date and location where opinion was signed